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Wednesday, August 14, 2013

'Never Channel the Ghosts of Dead Economists as a Substitute for Analysis'

 Nick Rowe checks in with David Laidler:

David Laidler goes meta on "What would Milton have said?": I tried to persuade David Laidler to join us in the econoblogosphere, especially given recent arguments about Milton Friedman. I have not yet succeeded, but David did say I could use these two paragraphs from his email:

However - re. the "what Milton would have said" debate  - When I was just getting started in the UK, I got thoroughly fed up with being told "what Maynard [Keynes] would have said" -- always apparently that the arguments of people like me were nonsense and therefore didn't have to be addressed in substance. I took a vow then never to channel the ghosts of dead economists as a substitute for analysis, and still regard it as binding!
MF was a big supporter of QE for Japan at the end of the '90s. I know that, because one of his clearest expressions of the view was in response to a question I put to him on a video link at a BofC conference. But so was Allan Meltzer at that time, and he is now  (a) virulently opposed to QE for the US and (b) on the record (New York Times, Nov. 4th 2010 "Milton Friedman vs. the Fed.")  as being sure that Milton would have agreed with him. In my personal view (a) demonstrates that even as wise an economist as Meltzer can sometimes give dangerous policy advice, and (b) shows that he knows how to deploy pure speculation to make a rhetorical splash when he does so. Who could possibly know what Milton would have said?  He isn't here.

David Laidler is probably the person best qualified to answer the question "What would Milton have said?", and that's his answer.

Speaking of Meltzer and substitutes for analysis, his last op-ed warns yet again about inflation. Mike Konczal responds:

Denialism and Bad Faith in Policy Arguments, by Mike Konczal: Here’s the thing about Allan Meltzer: he knows. Or at least he should know. It’s tough to remember that he knows when he writes editorials like his latest, "When Inflation Doves Cry." This is a mess of an editorial, a confused argument about why huge inflation is around the corner. “Instead of continuing along this futile path, the Fed should end its open-ended QE3 now... Those who believe that inflation will remain low should look more thoroughly and think more clearly. ”
But he knows. Because here’s Meltzer in 1999 with "A Policy for Japanese Recovery": “Monetary expansion and devaluation is a much better solution. An announcement by the Bank of Japan and the government that the aim of policy is to prevent deflation and restore growth by providing enough money to raise asset prices would change beliefs and anticipations.”
He knows that there’s an actual debate, with people who are “thinking clearly,” about monetary policy at the zero lower bound as a result of Japan. He participated in it. So he must have been aware of Ben Bernanke, Paul Krugman, Milton Friedman, Michael Woodford, and Lars Svensson all also debating it at the same time. But now he’s forgotten it. In fact, his arguments for Japan are the exact opposite of what they are now for the United States. ...
The problem here isn’t that Meltzer may have changed his mind on his advice for Japan. If that’s the case, I’d love to read about what led to that change. The problem is one of denialism, where the person refuses to acknowledge the actually existing debate, and instead pantomimes a debate with a shadow. It involves the idea of a straw man, but sometimes it’s simply not engaging at all. For Meltzer, the extensive debate about monetary policy at the zero lower bound is simply excised from the conversation, and people who only read him will have no clue that it was ever there.
There’s also another dimension that I think is even more important, which is whether or not the argument, conclusions, or suggestions are in good faith. ...

    Posted by on Wednesday, August 14, 2013 at 09:58 AM in Economics, History of Thought, Inflation, Macroeconomics, Monetary Policy | Permalink  Comments (26)

          


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